“The higher growth of consumer durables despite a somewhat adverse base effect, the year-on-year rise in manufacturing output after three months of contraction as well as the fewer number of its sub-sectors witnessing de-growth in February 2016 are encouraging trends”, Nayar said, adding that the IMD’s forecast of an above-normal monsoon has boosted the outlook for rural demand, which should help arrest the sustained contraction in consumer non-durables over the coming months.
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The rating agency, however, said investment demand remains tepid.
Economists surveyed by Reuters had forecast retail inflation would slow to 5 percent in March from an upwardly revised 5.26 percent in February.
After back-to-back droughts that hurt crops and led to higher food prices, India’s weather department said on Tuesday that the monsoon may be above normal this year. Factory output measured in terms of the index of industrial production (IIP) declined 3.4% in November, 1.2% in December and 1.5% in January, data released by the Central Statistics Office (CSO) showed. The core inflation is lower with 24 bps month-on-month decline.
The rate of price rise in vegetables was at 0.54 per cent, oils and fats 4.85 per cent, milk and products 3.33 per cent, while fruit prices deflated further at (-) 1.10 per cent in March.
“We continue to have flat growth and the 11-month cumulative growth is only 2.6 per cent, which is lower than the 2.8 per cent seen a year ago”, he told The Hindu, stressing that industrial production remained stagnant.
It fears a proposed hike of about 24 percent in the wages of almost 10 million federal government employees and pensioners later this year could put upward pressure of 1-1.5 percent on inflation.
The RBI said there are uncertainties over the inflation projection from recent unseasonal rains, the likely variation in distribution of monsoon, the low reservoir levels by historical averages, and the strength of the recent upturn in commodity prices, especially oil.
The central bank reduced rate in its policy review earlier this month by 25 basis points. “This will take the economy to a higher trajectory of around 8 percent growth”, said Chandrajit Banerjee, director general of the Confederation of Indian Industry (CII).
Electricity, gems and jewellery and minerals aided the overall industrial performance growth. Consumer goods showed mild improvement, growing by 0.8% in February after remaining stagnant in previous month.
However, urban consumption growth has picked up and resulted in increased production of consumer durables.
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“We are still seeing an increase in prices”, Mr. Sabnavis said regarding the consumer price index.
